Electric vehicle sales to get a boost amid pollution and energy security concerns

Countries like the US and India, for which oil security has become a strategic issue, have been exploring alternative energy sources to reduce their oil dependence.Malini Goyal | ET Bureau | March 05, 2017, 08:07 IST

New Delhi: This love affair began in the 1980s. Chetan Maini, then a sprightly teenager, was part of the core solar car team at the University of Michigan in the US and Australia.

Soon after at Stanford University, in the early 1990s, hybrid cars kept his passion going. By 1999, he gave it a name: Reva Electric Cars, India’s first maker of e-vehicles.

“It was an idea ahead of its time,” recalls Maini, a pioneer of e-vehicles (EVs) in India. Hybrids, alternate fuel and EVs weren’t a fad then. Pollution and climate change were not making headlines yet.

And India’s fledgling automobile industry was barely selling six lakh cars, often with dated technology. Playing in a niche space, it was a tough ride. Despite making some headway on the technology front, and a presence in 24 countries, Reva was losing money, and in 2010 was sold to Mahindra & Mahindra (M&M).

“All these years, it would be mostly us manufacturers who would lock ourselves in a room to discuss issues with nothing concrete emerging. This (the workshop) was refreshingly different,” says Sohinder Gill, CEO of Hero Electric and director of the Society of Manufacturers of Electric Vehicles.

Adds an upbeat Maini: “The workshop looked at a range of issues from energy security to a thrust on renewable energy and brought together multiple stakeholders. This hasn’t happened before. I see everything coming together.”

Tell-tale signs are all over. The headlinegrabbing American EV maker Tesla reportedly plans to debut in India this year. Guillaume Sicard, president of Nissan India’s operations, says the company will soon be testing its popular Leaf EV. Home-grown M&M thinks there would be takers for a `25-lakh plus electric sports car that it is developing.

Rahil Ansari, head of luxury carmaker Audi India, says that it will soon bring electric models in its high-volume segments like the Qfamily.

They are upbeat not without a reason. Today, 95% of the Toyota Camry sales in India are of the hybrid variant, says Shekar Vishwanathan, vice-chairman, Toyota Kirloskar Motor. He claims that the Camry hybrid is 47% more fuel efficient than the conventional variant.

The government is readying a scheme where commercial EVs may not be required to get permits, which are costly and timeconsuming, to help boost electric mobility.

“The government is determined to make this (EVs) happen,” says Ashok Jhunjhunwla, advisor, ministry of power and new & renewable energy. Cab aggregator Ola and its investor Softbank have made a proposal to Niti Aayog to run electric taxis.

In a pilot, Mahindra Electric, Ola and the government are partnering to introduce a fleet of 300 electric cars in Nagpur to test the feasibility of e-taxis in India. Road and highway minister Gadkari has promised all help including charging stations in his home constituency (Nagpur) for this. “We are working with the government to push mass mobility solutions in electric. The ecosystem is falling in place. The industry is at an inflection point,” says Mahesh Babu, CEO, Mahindra Electric. Cities in Gujarat and Uttar Pradesh have been reportedly identified for the next phase. It is a story playing out globally too.

Global EV sales are expected to double by 2024, accounting for 6% of new vehicles sales.

Startup Experiments Startups are likely to play a critical role in building the ecosystem around EVs, says V Ramakrishnan, cofounder of automotive consultancy Advanteum. In July 2015, Sanjay Krishnan founded Lithium Urban Technologies, a Bengaluru-based startup that offers employee transportation services using EVs to companies like Tesco, Unisys, Accenture and Adobe.

We wanted to look at transportation from an energy level as oil security and a surge in pollution were making headlines," he says.

Lithium has 10 customers, 55 employees and owns 400 EVs. Each vehicle has two drivers who work on shifts. "We have done lots of things that have never been done before," he says. His company owns and operates charging stations, too. "Companies initially come to us not because of the green factor but the cost economics that we offer," he says.

For example, he says, the running cost of a Mahindra E2O (an electric hatchback) is 70-80 paise per km as against say an Indica which could be upwards of Rs 4 per km. Beyond cost, bear in mind that the 10-12 million km that the startup's fleet has logged so far have a green footprint. In three years, Krishnan plans to take the company pan India with a "few thousand EVs" in most big cities like Chennai, Hyderabad, Mumbai, Pune.

Bigbasket too is one of the early adopters. The e-grocer has been using about 10 eSupro vans for intra-city delivery in Noida and reportedly plans to increase the number to 50 over the next six months. Mahindra Electric, which launched four variants in 2016 ¡X e2o plus, eVerito, eSupro Van in cargo and a passenger version ¡V is hoping sales to grow exponentially with demand from companies like Amazon and Ola. "We have reached a stage where the models have been finetuned and are now ready to scale up," Babu says.

Progress has been slower in two-wheelers for which India is the world's largest market. In 2016, the industry sold just 22,000 e-bikes, or just 0.5% of total sales.

"There has been a huge negativity around high battery costs," says Gill. But that may be set to change. Last year, Hero Motocorp invested `205 crore in Ather Energy, an IIT-Chennai incubated startup that is developing e-bikes. Gill of Hero Electric says that demand is picking up from customers like food delivery companies and e-bike taxi startups like Promto.

NOW, a bike taxi and delivery platform, is one of them. With over 70 merchants including companies like Subway and BurgerKing, it has over 290 bikers offering food delivery services. With 120 e-bikes in its stable, it expects the number of e-bikers to grow to 1,500 by the end of this year.

"For conventional bikes we pay `2 per km as fuel cost. E-bikes take the fuel cost out of the equation making it much cheaper for us," says Bharat Khandelwal, cofounder, NOW.

Shifting undercurrentsIf EVs are so cost-and-fuel efficient then why has growth been so patch so far ¡X the segment has grown by just 9% between 2013 and 2016 on a compounded annual basis. In 2016 India sold just 34,283 EVs (two-and-four wheelers).

There are several reasons for this. Typically, the cost of an EV is substantially higher than conventional vehicles thanks to the high battery cost. This is despite the government subsidy often available to EVs. The Indian government offers incentives of up to Rs 29,000 for ebikes and Rs 1.38 lakh for e-cars under the FAME India scheme of 2016.

The Delhi state government has further slashed value added tax from 12.5% to 5% for EVs. Yet, they remain expensive. For example, the e-Verito is around Rs 1 lakh pricier than the Verito diesel in Delhi despite the government subsidy, says Babu of Mahindra Electric. The price difference is even more striking in two-wheelers.

An Ather e-bike is two times the price of a conventional bike. "In a Rs 1 lakh bike, the lithium battery alone would cost Rs 40,000. Think of it like this 'you pay for five years of fuel upfront when you buy an e-bike," says Gill.

There are other challenges ' of charging infrastructure for plug-ins, patchy availability of power and drivers' range anxiety (typically on one charge, a battery can run a limited distance making drivers anxious if they run out of charge midway). Also, for companies like Toyota, hybrid kits are currently imported (as current volumes don't justify local manufacturing) and hence pay stiff duties of over 80%.

A combination of factors ' improving technology, rising pollution concerns, government policies and startups evolving new business models ¡V is creating an enabling environment. Lithium batteries, a critical factor in popularising EVs, are becoming more efficient and less expensive.

MNCs are working together ' like Nissan and BMW and Daimler and Qualcomm¡V to reduce battery cost and charging time. According to an Ernst & Young report, these collaborations will help bring down the cost of battery and charging time to $150/kw (it was $600/kw in 2011) and to just 20-30 minutes of charging by 2025. The range (how many km can an EV run on a single charge) has been improving rapidly. Most EVs in the market today can barely manage a range of 100 miles.

But the recently-launched Tesla model S P100D promises an average of 315 miles per charge. Add to this two other important factors. Countries like the US and India, for which oil security has become a strategic issue, have been exploring alternative energy sources to reduce their oil dependence.

Also, amid growing concerns around pollution and climate change, governments globally are tightening emission norms. For example in India, tougher emission norms by 2020 will make diesel and petrol engines pricier and non-polluting EVs relatively more attractive. The best global example is Norway.

Through a slew of financial and non-financial incentives, it leads the world in per capita EVs. It has 5,00,000 EVs on the road today and in 2016 EVs comprised 40% of newly registered passenger cars. Progress like this will disrupt the automobile industry, says Anil Sharma, principal analyst, IHS Markit.

EVs require new technologies and component systems that will offer windows for new players across the value chain ' from batteries, charging stations to even fullfledged cars ' to get into the game. Chinese mobile maker LeEco too is betting on EVs.

Change afootWorried about surging pollution, the government is likely to push for electrification of commercial vehicles and public transport.

It is expected to ban diesel vehicles in a phased manner while targeting to roll out over 50 lakh electric and hybrid vehicles in the next three years. Reports suggest that if the government manages to introduce 50 lakh EVs, it will save up to 9,500 million tonnes of fossil fuel and cut emission of greenhouse gases by up to 2 lakh tonnes. Studies suggest that India could potentially sell 7 million EVs by 2020.

Power availability, a big precondition for EVs, should help. In 2016, for the first time in history, India turned from a power-starved to power-surplus nation. With a thrust on solar power, India's solar power generation capacity crossed 9 GW by 2016 end; the plan is to get to 175 GW by 2022, even as tariffs have tumbled to under Rs 3 per kwh from double digits in 2011.

The future looks bright, as long as the government plays the lead role. "What we need is a stable, consistent long-term policy -- a public transport programme that pushes EVs," says Gill. The concern is that with multiple ministries involved ' from road transport & highways and heavy industries to ministry of power and urban development -- there might be coordination issues. "Challenges are always there. But there are huge compulsions too (of rising pollution and oil imports). We will figure a way out," says an upbeat Jhunjhunwala.

“To save the environment and to fight climate change, my government has planned a major campaign. By 2022, we want to generate 175 GW of renewable energy. In the last three years, we have already achieved 60 GW or around one-third of this target,” he said.